Seven out of 10 seriously delinquent U.S. mortgage borrowers are not on track to avoid foreclosure, according to a new report released this morning by the Conference of State Bank Supervisors and 11 state attorneys general. It also found a significant percentage of subprime borrowers are already struggling to make payments before their loans have reset to higher rates, and that lenders’ efforts aren’t keeping pace with the rapid increase in bad loans.

The State Foreclosure Prevention Working Group, led by Iowa Attorney General Tom Miller, is a follow-up effort to an initiative begun last summer by Miller with 36 other states to bring major mortgage servicers to the table to work with borrowers to mitigate foreclosures. The report covers loan data from October 2007 from 13 of the largest subprime loan servicers, which cover about 58 percent of the subprime market. The study found those companies held nearly 100,000 foreclosed properties on their books as of Oct. 31. The working group is still seeking cooperation from seven more of the 20 largest loan servicers, including Wells Fargo & Co.

“We have worked very hard with the servicers and the agencies to get the right information,” Miller said in a national teleconference this morning with reporters. “This was fairly painstaking. The bottom line of what we found is that … progress has been made. I think it’s also clear that a lot more effort has to be made.”

According to the 46-page report, “The lack of interaction between mortgage servicers and homeowners remains a major problem. … Our data suggests that a rising number of loan delinquencies are outpacing the increase in loss mitigation efforts.”

The report also found that 45 percent of homeowners who are in contact with loan servicers are working toward a loan modification. Other findings include:

• Servicers are increasing their use of longer-term changes to loans rather than their earlier reliance on short-term repayment or forbearance agreements.

• Most resolutions of delinquent loans in October occurred due to the homeowners catching up on back payments.

• The refinance option has nearly evaporated; despite recent interest rate cuts; “the mortgage industry will not be able to refinance its way out of this crisis absent dramatic changes in available loan products or a reversal in home price declines.”

The full report is available on the Conference of State Bank Supervisors’ Web site at www.csbs.org.